The Davids Amongst the Goliaths

An analysis of the future of sole-proprietorship law firms in Singapore.

As at 26 March 2002, there were 444 sole-proprietorship firms in Singapore. Sole-proprietorships peaked in 1999/2000 when the number was 463. This was reduced to 454 in 2000/2001 and as of this year it stands at 444.

The graph below will show the pattern of the growth of sole-proprietorships and what appears to be a decline in their numbers. This decline appears to be related to the exodus of practitioners from the profession altogether. This year more than 300 did not renew their practising certificates. The number of practitioners in active practice was 3,537 at its highest. This decreased to 3,533 as of 31 March 2002.¹

The second graph shows the profile of the sole-proprietorship firms in Singapore. The largest number of them are one-person firms. These are the Davids amongst the firms, some of which have more than 150 lawyers. The question is whether these Davids can survive in today's climate in the profession. I will deal with this when I discuss the challenges that face sole-proprietorships. (See graph to the right.)

Chief Justice Yong came in like a whirlwind, sweeping off inefficient systems in the administration of justice and shibboleths that had prevailed for far too long and which had stymied progress. His emphasis was more on the management of justice rather than in the administration of it. His efficiency ensured there were no delays and unnecessary adjournments.

His determination to clear the backlog of cases and to ensure speed in the disposal of cases was both a boon and a bane. Justice delayed is of course justice denied, but justice hurried can be justice buried.

In a way the CJ has brought justice to the market place. When launching the Technology Court, he said:

The dynamic forces of change in the market place will also affect the justice system. Unlike in the past, the price of a product or service is no longer the sole determinant factor; customer satisfaction in terms of quality matters as much, if not more. Business and industry have not been slow to respond to this change. There has been a paradigm shift in management science towards total quality management, by which an entire organisation adopts a continuous quality improvement philosophy.²

Words like these would have caused wonderment in the minds of a number of lawyers. Gone are the days that advocates could take practice in a relaxed style. If I may quote the CJ again:

Our courts had retained certain characteristics and practices perhaps more suited to the era of Empire. In particular, we continued to view the business of the courts from an unbusinesslike perspective.³

This was a veiled criticism of those responsible for the judiciary and the legal profession as a whole.

In the wake of the whirlwind came innovations in the administration of justice - the Electronic Filing System, the Electronic Searches at the Registry, Justice-on-Line, where hearings in Chambers through Registrars could be conducted from the law firms themselves, and other new-fangled processes which befuddled a practitioner. But the courts have to be in tandem with the government's policy, as it were, as Singapore vies for a place in the high-tech sun.

The CJ could not have found a greater champion for his reforms than the former Prime Minister of Singapore, Mr Lee Kuan Yew. Speaking at the conferment of Honorary Fellowship of the Academy of Law in 1990, Mr Lee said:

The tremendous development in the information technology will change the way lawyers work. Lawyers who adopt computer technology will increase their productivity, saving time, manpower and costs.⁴

Challenges Facing Sole-proprietorships
The emphasis on high-tech and the electronic disposal of matters, which were previously handled manually by lawyers, would cause a major problem to small firms. These firms would be caught in a time warp if they do not carry out substantial investments and improve the system so far as the day-to-day practice is concerned. Small firms also face competition from the bigger firms especially where sourcing clients is concerned.

A good number of sole-proprietorships had depended on conveyancing practice to generate income. With the recession having set in and with the impending abolition of scale costs and the freeing of conveyancing work which was tied to lawyers, a number of firms are facing difficulties. These difficulties have been compounded with the tie-up of some bigger firms with banks which offer packages to customers who buy or mortgage properties. Since 1 September 2001, such tie ups have been prohibited under the Professional Conduct Rules ('the Rules') if they have the effect of:

1. providing conveyancing services free;
2. levying different charges for conveyancing services according to whether or not the client instructs a particular lawyer, law firm or law corporation;
3. affecting the availability or price of other services offered by the referror or any party related to the referror that are conditional on the client instructing a certain lawyer, law firm or law corporation; and
4. impairing the right of the client to appoint a lawyer, law firm or law corporation of his choice.⁵

High overhead costs, like rental, CPF rates, increase in filing charges in courts have all added to the difficulties of the small firms.

Globalisation, WTO and Entry of Foreign Law Firms
As if the existing woes are not enough, we now have globalisation and our membership of the World Trade Organisation which dictates that we shall have an open door policy for the movement of goods and services. We are told by our economic and political pundits that globalisation is good for Singapore because Singapore has to be the centre of trade and commerce. We lack natural resources not to mention that we do not even have enough drinking water. What a free market economy provides is the free flow of goods and services.

Coupled with the Singapore government's policy on globalisation, we also have the import of foreign talent to man our banks, the insurance industry, the shipping industry as well as the medical, legal and accountancy professions.

Fortunately for us, certain quarters in the government have tried to stem the tide of invasion from foreign law firms who insist on being allowed to practise in Singapore, both foreign as well as Singapore law. The floodgates have been opened but the deluge has not been as massive as we feared. There are restrictions placed on foreign law firms coming into Singapore and setting up shop here. However, they have still obtained footholds in the form of Joint Law Ventures and Formal Law Alliances. The entry of foreign law firms bolsters the presence of transnational corporations in Singapore. They are adjuncts to the TNCs which are hungry for cheap labour and low infrastructure costs.

Some of our bigger firms have hastened to tie the knot with them. In the process, some have been bruised as the failure of some of the joint ventures will show. Andersen Legal and Rajah & Tann have parted company and so have White & Case and Colin Ng & Partners.

Even at the wooing stage there are second thoughts about partnership. In the March 2002 of Asian Legal Business ('ALB') a writer states:

So, for over a year, CC (Clifford Chance) has been in a dilemma. Ideally, wanting local law capabilities consistent with the global standard in practices, it has courted in vain for an alternative bride. One lawyer says 'CC feels that there is nobody left and Wong Partnership is desperate to do something, so CC is just going to do a lousy deal with them.'

It is obvious that these foreigners do not have a great regard for local law firms. Another commentator in the same issue touching on possible joint ventures goes on to say, 'but not enough to justify it (a JLV) long term'.

A further commentary is a piece of gratuitous insult. Again in the same issue touching on the Wong Partnership and Clifford Chance Joint Venture, the writer says, 'after the first four or five firms, you are really stuck to find firms with sufficient quality in the areas which would be of interest to international firms' - Bruce Cooper, a partner at Freshfields, ALB, pages 1 and 8.

It is obvious that foreign law firms come to Singapore not with the altruistic view to transfer technology and to assist in the obtaining of greater professional skills on the part of our lawyers but for them to maximise their benefit. An article by Conrad Raj in Business Times of 14 March 2002 has very revealing information on the joint ventures with foreign firms. What both the foreign law firm and the local joint venture partner have been looking for is maximising profit and not so much the sharing of knowledge.

Sole-proprietors and small firms watch this spectacle from the sidelines. They can comfort themselves with the thought that the little pond that they were splashing in is safer than the choppy sea ahead. But it is not to say that we have to shut our doors to foreign law firms. We should receive them on a reciprocal basis. Let Singapore lawyers too have as unimpeded an access to those countries where the foreign law firms come from. If there is a mutuality then the concept of globalisation and free market makes sense. Sole-proprietors or even small firms may obtain valuable insights into the laws of both regional countries as well as international systems if they are prepared to expand their practice.

The Road Ahead for Sole-proprietors
'Sweet are the uses of adversity.' The Bard was not daydreaming when he said that. Some of us get dejected when confronted with obstacles which appear to be insurmountable. No.

Size does matter in certain cases but if small firms or sole-proprietors can build niche practices, there is no reason why sole-proprietorships should not be viable and profitable. One sole-proprietor who had great success at the Bar comes to mind straightaway. It is David Marshall who for most of his years in practice was a sole-proprietor.

We also had men like MV Brash and LAJ Smith who had been remarkably successful at the Bar.

Possible avenues of expanding and reducing costs can be recommended:

1. enter into loose arrangements where costs can be shared in the form of sharing premises, staff and law books;
2. update knowledge by taking part in seminars and workshops and choose areas of practice where one can specialise;
3. publish articles on areas of specialisation so that one acquires a certain reputation in the market for such expertise;
4. have arrangements with other law firms where a specialised piece of knowledge is necessary and the sole-proprietorship does not have such expertise. Costs can be shared between solicitors; and
5. in engaging the services of specialists, one acquires knowledge and experience by participating in the work that the specialist will carry out on behalf of the sole-proprietorship.

Whatever happens, we should heed the words of the former Chief Justice of Australia, Sir Anthony Mason, who made this observation:

Some proposals relating to the courts smacked of the way in which economists would deal with their production plant. There were proposals that salaries and funding be related to productivity, apparently measured by the number of cases processed. Happily, these suggestions did not take root.⁶

In our haste to place Singapore on the first spot for excellence, the small man's interest must also be borne in mind. The Davids of law should take comfort in the fact that there is the ordinary Singaporean out there who will still need your services with a personal touch with or without high-tech wizardry.

G Raman
G Raman & Partners
[The views contained in this article are the personal views of the writer.]

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